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KATHMANDU, JUN 10 -
Nepal Bankers’ Association (NBA) on Sunday warned that they would not work with Melamchi Water Supply Development Board (MWSDB).
According to NBA sources, there has been an understanding among bankers not to give counter guarantee to any foreign bank that gives guarantee to Melamchi ’s contractor.
An NBA executive member who participated in Sunday’s meeting said they came to this understanding after Melamchi Board sought payment from two Nepali banks — Himalayan Bank Limited (HBL) and Bank of Kathmandu (BoK) — that had given counter guarantee, instead of making efforts to release the amount from China Construction Bank that had given bank guarantee to the project’s contractor — China Railway 15 Bureau Group.
They also agreed not to hold any transaction with the Chinese banks which failed to make payment of the guarantee amount to the Melamchi project as per the international practice.
Giving counter guarantee means domestic banks will release bank guarantee amount on behalf of foreign banks giving guarantee, if needed.
HBL and BoK had provided the counter guarantee in the form of performance security of $6.62 million and guarantee for advance payment of $6.62 million and 1.4 million euros. Both HBL and BoK are having problems in releasing the amount for Melamchi .
After the termination of the contract with the Chinese contractor in September 2012, the contractor filed a fraud case in a Chinese court against the Melamchi Board, China Construction Bank, HBL and BoK to block the release of the bank guarantee amount.
The bankers’ decision has come at a time when the Melamchiboard recently selected a new contractor — Italy’s CMC Cooperativa Muratori e Cementisti di Ravenna—for remaining work on the tunnel. “No bank will be ready to cooperate withMelamchi as it has been seeking payment from domestic banks instead of fighting legal battle with the Chinese contractor that abandoned the project midway,” said HBL CEO Ashoke Rana.
As per the international practice, the payment of the bank guarantee amount can be denied in case of fraud, according to Rana. “But the Melamchi board didn’t make any effort to defend the case by making available necessary documents to prove that it did not commit fraud as accused,” he said.
The Chinese bank has been denying releasing the bank guarantee amount, citing the court order. But it has said it is ready to fight a legal battle to ensure the release of the guarantee amount seeking necessary documents from Nepali defendants.
NRB, a few months ago, had tried to seek a solution to the matter at central bank-level a few months ago. The Melamchi board last week also asked the central bank’s help in securing the release of the guarantee amount.
The Melamchi board is also preparing to seek compensation from the two Nepali banks. Acharya, however, said the compensation would be sought after the bank guarantee is released.
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